NESG data shows Nigerian construction output outrunning demand as lending rates reach 46%
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Nigerian developers are borrowing at between 20 and 46 per cent while new orders in construction have slipped below the expansion threshold, according to NESG sector data that shows strong output running ahead of demand.
Nigerian developers are paying commercial bank lending rates of between 20 and 46 per cent at a time when demand for construction work is weakening, according to stakeholders cited in a review of the sector's latest business conditions.
The Nigerian Economic Summit Group's (NESG) Construction Sector Report, titled "From Cyclical Growth to Durable Investment", found that the sector has the strongest business conditions of the sectors it assessed, but that current demand and new orders have softened. The Demand Condition Index fell from 106.8 in the first half of 2025 to 97.3 in the first half of 2026, moving below the 100 benchmark that separates expansion from contraction. The Supply Order Index also fell, to 97.4.
The weak demand contrasts with strong output. The Overall Business Conditions Index stood at 117.7 in the first half of 2026, after rising from 93.7 in 2024 and 122.5 in 2025. The General Business Situation Index was 166.2 and the Production Index 142.7. Construction grew by 6.4 per cent in the first half of 2026, up from 5.5 per cent in 2025 and 4.2 per cent in 2024, making the sector a more important source of overall economic growth.
The Federation of Construction Industry (FOCI) said the high lending rates were adding to the cost of delivering housing projects. Developers are also contending with rising construction costs, which have forced some to reduce apartment sizes, modify building specifications, renegotiate project terms or build in phases.
The president of the Real Estate Developers Association of Nigeria (REDAN), Oba Akintoye Adeoye, has raised concerns about mortgage interest rates, which he said typically exceed 20 per cent, putting home loans beyond the reach of many low-income earners. He said REDAN was advocating mortgage rates of between two and six per cent, and called for the recapitalisation of the Federal Mortgage Bank of Nigeria, policy reforms and increased government support for developers.
Property analyst and chairman of the Association of Capital Market Valuers, Chudi Ubosi, pointed to a widening gap between construction costs and the purchasing power of prospective buyers, saying rising property prices were reducing the number of Nigerians able to buy newly developed homes and making it harder for developers to predict market viability.
Investment is one bright spot. NESG said construction is the only sector where current investment has moved into expansion, with its Investment Index rising from 85.0 to 113.9 within a year, backed by profitability and liquidity readings of 126.7 for operating profit, 156.3 for cash flow and 123.4 for employment. The group warned that if demand stays weak despite high expectations, growth "could become increasingly dependent on existing projects rather than a sustained pipeline".